A hearing to discuss remedies and hold a trial on damages will take place on August 9

Apple lost the ebooks battle earlier this month when a judge ruled that the tech giant had conspired to raise prices, and now, Apple has been handed some potential consequences as a result of that ruling.

The U.S. Department of Justice and 33 U.S. states and territories have proposed that Apple be banned from entering anti-competitive e-book distribution contracts for five years; end its business models with the five publishers it conspired with; use an outside monitor to make sure that its antitrust policies are effective, and allow retailers like Amazon and Barnes & Noble to provide links to their options for two years.

"Under the department's proposed order, Apple's illegal conduct will cease, and Apple and its senior executives will be prevented from conspiring to thwart competition," said Bill Baer, head of the Justice Department's (DOJ) antitrust division.

These proposals have to be approved by U.S. District Judge Denise Cote, who is overseeing the ebooks trial.

All of the five book publishers have already settled with the DOJ, while Apple was the only one to go to trial on June 3.

The ebooks fiasco started in April 2012, when the U.S. Department of Justice (DOJ) sued Apple and the five book publishers over anticompetitive practices concerning e-book sales. These book publishers were Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).

The book publishers were accused of partaking in an agency sales model with Apple, which meant that publishers were allowed to set the price of a book and Apple would take a 30 percent cut. In addition, the publishers could not let rivals sell the same book at a lower price. Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.

But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy. Apple then came along with iBooks, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.

However, Apple attempted to resolve this when it struck a deal with publishers to implement the agency model in 2010. This helped Apple at the time of its iPad and iBooks launch. But its deal with publishers made it seem like an attempt to thwart Amazon's dominance.

Last month, Lawrence Buterman (a DOJ lawyer) said that Apple's move to increase e-book prices hurt consumers by costing them "millions of dollars."

Cote ruled that Apple tried to raise the prices of e-books through an agency model with other book publishers after a non-jury trial, which ended on June 20.

A hearing to discuss remedies and hold a trial on damages will take place on August 9.

With music, there are three kinds of costs: constants (performers, editing, studio space, equipment), physical media (materials, manufacturing equipment, manufacturing labor, physical distribution), or digital distribution costs (file formatting and conversion, DRM, electronic distribution.) While music is closer to the same cost between electronic distribution and physical media, they still aren't the same. It's about 20% cheaper for electronic distribution if you sell 100,000 copies.

With either books or music, the costs per electronic copy go down when the number sold goes up, but that's not the case with physical media. With electronic distribution, a company pays for the servers and bandwidth, then host tens of thousands of songs for distribution. The cost per song per copy comes out to less than 1 cent for hosting and distribution. The cost for formatting and DRM is incurred initially, usually for about $10,000 in software for a whole album, electricity, and labor, but if they're selling 100,000 copies of a song or book, that is pretty small on costs.

Physical media has a nearly fixed cost per item, either book or CD, for the life of a product. (Nearly fixed. There are certain manufacturing setup costs that are incurred at the beginning of a run, but those are pretty diluted after 10,000 copies, and have less than 5% impact on costs if you're doing a 10,000 copy run or a 100,000 run.) I know for a fact that it costs, in lots of 10,000, a little less than $2.25 to produce a 600 page paperback novel, and $0.62 for a physical CD, and $.14 for a typical CD holder with cover art.

In fact, the costs per item can actually go up with physical media under certain circumstances. If the Japanese market, for example, opens up to a book or CD, the import costs and transportation costs can go up dramatically compared to the US market. With electronic distribution, those don't go up at all.

Tell me, how can you justify saying they cost the same under these circumstances? Tell me the logic on why you think this.

I can tell you it IS the exact same thing, you have not come close to proving otherwise. Apple simply took the same approach they did with music and applied it to book sales. It's not illegal, but logical. There is no conspiracy.

The entire scheme is illegal because Apple essentially told the Big Five they either play along or lose any presence on iTunes. It is illegal because it is not designed to compete at all - rather, it is designed specifically to force everyone to play by Apple's rules.

Apple gets to maintain their lofty profit margins. Publishers' revenues go up. Consumers and Amazon.com paid dearly as a direct result of this anti-competitive collusion scheme.

I don't think you're naive at all. No, I think you are willfully ignorant and pro-Apple. You wouldn't create a second account otherwise to troll DT and praise Apple's behavior as if it's the best thing since sliced bread was invented.

The market determines the price. VHS movies were once over $50 each (not adjusted for inflation) so why are blu-rays $25 and CD's $15? Why were cd's more than cassette tapes when CD's were cheaper to produce?

e-books require much less storage space vs a digital album so why are e-books not 99 cents? Who are the publishers to say what the price should be and who are you to argue with what is a fair price?

Someone has to say "you see this item? It has to have some value to it, now lets see what the market is willing to pay for it at this moment in time".

Apple didn't re-invent the wheel, they simply took the MODEL of digital music and applied it to digital books. I can't fathom how selecting a price model for an item can ever be considered 'price fixing', if anything they are being chastised for bucking the trend.

quote: VHS movies were once over $50 each (not adjusted for inflation) so why are blu-rays $25 and CD's $15? Why were cd's more than cassette tapes when CD's were cheaper to produce?

It wasn't due to costs but due to the stupid studios trying to make money on a dying market.

CDs *were* more expensive to make, like back in 1980. Like anything else manu. costs come down.

quote: Apple didn't re-invent the wheel, they simply took the MODEL of digital music and applied it to digital books. I can't fathom how selecting a price model for an item can ever be considered 'price fixing', if anything they are being chastised for bucking the trend.

And you are forgetting they forced everyone else to follow suit and forced everyone else to have the same prices as well.

quote: Apple didn't re-invent the wheel, they simply took the MODEL of digital music and applied it to digital books. I can't fathom how selecting a price model for an item can ever be considered 'price fixing', if anything they are being chastised for bucking the trend.

Apple used its dominant position in the digital music business to create conditions in the ebooks market that are purposely favorable to themselves.

The entire scheme is price-fixing at its worst. Show me TEN, yes, 10, instances where consumers clearly benefited from this anti-competitive behavior.

If publishers don't like the format, don't publish books on it. Period. Just as bands are not forced to use Spotify, publishers are not forced to use iBooks. Let the market dictate whether or not the service is worth it. It's the EXACT SAME THING AS THE MUSIC INDUSTRY. There is no price fixing conspiracy. Period. End of Story.

Why wouldn't the publishers love the ibook format? They get to set higher than normal (e-book) prices and they decrease price competition across the majority of the industry.

To differ, Apple/itunes set a $.99 price for songs and forced the publishers and artists to accept the terms or not sell through itunes. Many music publishers initially balked because they wanted to sell songs for more than $.99. (Some artists/publishers still don't sell through itunes)

The ibook deal was completely the opposite. They went to the market leaders, got them all together to say "lets raise the price and not allow any distributor to sell it for less".

There was clearly collusion amongst the publishers and Apple and it is unbelievable that you can't see it.

Also, you have given ZERO proof that physical distributions and electronic distributions costs the same. For example, ship a copy of "Atlas Shrugged" on a thumb drive to a person and then ship that same book in physical format. Let me know which is cheaper. Add this to the fact that this is only a simple example of distribution.

Rule #1: If there is no actual conspiracy , claim there is a conspiracy. Denying that it exists means you have confirmed the suspicions of others.

Case in point: General Keith Alexander claimed in last year's DEFCON that accusations of NSA spying on Americans at home were overblown. Then came Edward Snowden, whose leaks affirmed those very accusations. Alexander was caught lying in public; the NSA was indeed spying on Americans at home, when it claimed all along it wasn't doing it.

Oh and by the way, it was no ordinary convention. It was DEFCON, where trust is everything, and there are grave consequences when you breach the trust of others.

Result: all government representatives are not welcome at this year's DEFCON.

Congrats, your continuous denials are giving us proof there IS a price-fixing conspiracy by Apple.

Good list of costs but forgetting cost to store or display said physical product. Physical inventory has a cost that has to be incurred by every retailer to store inventory and stock it on displays. Which also adds to cost of physical items.